Agape

Carnival Eliminates Dividend to Preserve Cash

Actually, when I chose that name I had in mind my reaction to your article. It left me agape. I am agape that you would reference your own earlier article as a source for this article, without even mentioning that you are the author.

I am agape that you refer to Carnival's recent capacity growth as "explosive" when it is actually quite modest relative to the 2000-2004 period. And no new ships have been ordered in recent years because, in management's opinion, the anticipated return is not sufficiently high. It should be noted that Royal Caribbean has not demonstrated the same discipline. Richard Fain is going to build ships whether they end up being profitable or not.

Major discounting is occurring in certain brands and regions. I do not believe it is across the board. Yet. The Carnival short cruises out of Florida have tanked, but HAL has held up well. The voyager class ships of RCL have held up as has Disney. More importantly, look back to the round of discounting that followed 9/11. Travel agents started screaming, "Hurry and book a the lowest cruise prices in 20 years!" The public came running, and those that didn't run missed out on the deals. When the Caribbean was weak a year ago after a series of hurricanes, a little judicious discounting was done and the prices came back.

In most industries, discounting leads to more discounting and an ugly downward cycle. In cruising, discounting leads to travelers running back to book the ship or itinerary they've always dreamed of sailing on. It's not an attitude I condone, but there are many Americans who will give having a great cruise priority over securing their retirement.

Could this be what CCL management is thinking about when they estimate a rebound next year?

Since you have cruised a lot, you realize that there is a large subset of serial cruisers who do not consider the economy when they book. These are things you must be aware of but left out in your haste to construct a bearish case against CCL.

I am not a company insider. Just an investor and cruiser.